Foxconn (Hong Hai Precision Industry) and Saudi Arabia’s Public Investment Fund (PIF) have agreed to jointly establish an electric vehicle (EV) brand named Ceer. PIF is Saudi Arabia’s sovereign wealth fund, and Ceer will operate as a joint venture of the two parties. As the country’s first EV brand, Ceer will target not only the home market but also the wider regional markets of the Middle East and North Africa.

Saudi Arabia represents largest car market in the Middle East. The country’s new car sales totaled 580,000 vehicle units for 2021. This year, however, has seen a decline with the figure for the first three quarters coming to 290,000. Until now, Saudi Arabia has no home-grown car brand, and there is no carmaker indigenous to the Middle East. Presently, Toyota and Hyundai are the two main automotive groups operating in Saudi Arabia. The former’s and latter’s market shares in the country come to 34% and 18% respectively. Also, since Saudi Arabia is one of the world’s major oil producers and has kept gas prices low for its citizens, the conditions of its car market give an absolute advantage to vehicles powered by fossil fuels. Up to recently, Saudis have had no real incentives to invest in the development of electric cars and the build-out of the supporting infrastructure. In terms of “green” offerings, the Saudi car market so far has only received hybrid electric vehicles (HEVs) from a few automotive brands (i.e., Toyota, Lexus, and Hyundai). Among countries in the Middle East, Israel is currently the leader with respect to EV availability.

Even though Saudi Arabia continues to build its wealth primarily through the exportation oil, it is now driven by government policies and the momentum of reform to develop a domestic EV industry. For instance, the Saudi government is promoting electrification for at least 30% of the vehicles operating in the country’s capital Riyadh by 2030. However, this target is not mandatory. Turning to the creation of a home-grown EV brand, this joint venture with Foxconn is also among a series of actions taken by the Saudi government to reduce carbon emissions, adopt green energy, and reform the country’s economy. More measures need to be implemented to support the growth of a domestic EV industry. After all, the Saudi Energy Ministry just completed the regulatory framework for EV charging stations this August.

Among EV brands and startups, the most noticeable ones tend to come from the US and China because these two countries are the world’s major car markets and possess enormous domestic demand. On the other hand, opportunities are also brewing for new entrants in the emerging markets that are promoting vehicle electrification. The UAE, for example, has a local EV startup named Al Damani that begun small-scale production this June. TOGG, which is another newly formed company, commenced production on Turkey’s first EV this October.

Commenting on the formation of Ceer, TrendForce said it is very difficult for EV startups to grow their businesses especially if they are operating in countries without an existing automotive industry. Usually, these new companies will have to poach talents from the more established automotive companies and obtain licenses for certain key technologies. Ultimately, they will have to draw enough support from the automotive supply chain in order to have a chance to push their vehicles to the mass production stage. Additionally, while dealing with the complexity of vehicle assembly, startups will have to quickly scale up production in order to control their costs. All of these challenges have to be overcome by rising EV manufacturers that are located in emerging markets.

According to TrendForce, the scope of IoT devices continue to expand under a wave of global digitization and smart machines including in industrial robotics, AGV/AMR, smart phones, smart speakers, smart cameras, etc. In addition, the deepening application of technologies such as autonomous driving, image recognition, speech and semantic recognition, and computing in various fields has catalyzed the rapid growth of AI chip and technology markets. The size of the global AI chip market is expected to reach US$39 billion in 2022, with a growth rate of 18.2%.

Since current utilization of AI chips are mostly in cloud computing, security, robotics, and automotive applications, they will enter a period of accelerated growth in 2023. In particular, the two fields of cloud computing and automotive applications will lead rapid market growth. By 2025, the size of the global AI chip market size is expected to reach US$74 billion, with CAGR from 2022 to 2025 reaching 23.8%.

ASIC chips have wide-ranging prospects, with market share in AI chips increasing year by year

From 2020 to 2021, the amount of data generated by datacenters and various terminal devices continued to rise, pushing chip technology to its limit, with demand for computing power becoming more difficult to meet. Therefore, many manufacturers have successively invested in high-end IC design and development. With increasing demand from various parties, the AI chip market is set to grow rapidly. The size of the AI chip market is expected to reach US$93 billion in 2026. CPU and GPU still occupy the lion’s share of the AI chip market and are growing steadily, while the ASIC market has expansive prospects and its advantages and characteristics can assist users in data processing, consumer electronics, telecommunication systems, and industrial computing develop product portfolios and shorten the innovation cycle of products, services, or systems.

TrendForce research shows that CPU, GPU, and ASIC chips will account for 33%, 34%, and 26% of the AI market, respectively, in 2026. The ASIC chip market will grow the fastest for two reasons. First, demand in the consumer electronic equipment market has increased and most developers of small and medium-sized equipment prefer 7nm ASICs. Second, workloads and structural demands of 5G, low-orbit satellite communications, cloud, and edge computing continue to increase, as telecommunications systems are the largest end-use market.

Since current utilization of AI chips are mostly in cloud computing, security, robotics, and automotive applications, they will enter a period of accelerated growth in 2023. In particular, the two fields of cloud computing and automotive applications will lead rapid market growth. By 2025, the size of the global AI chip market size is expected to reach US$74 billion, with CAGR from 2022 to 2025 reaching 23.8%.

（Image credit: Unsplash）

According to TrendForce, the global quantum computing market was valued at US$470 million in 2021, an increase of 16.7% compared to 2020. This market is mainly led by China and the United States, driving global quantum computing and its technological progress, especially in upper-layer software. In terms of algorithmic speed, small-scale problems have been put to the test through experimentation. The market is expected to reach US$580 million in 2022, with an annual growth rate of approximately 18.8%, and current growth rate expanding every year until 2027.

According to TrendForce, as stated in the Chinese government’s plan for software and information technology services, its quantum technology policy will be further implemented from a national level to departments including national defense, industry, and technology and more targeted policies will be released through tiered departmental levels such as for AI, quantum information technology, biotechnology, semiconductors, and autonomous systems. To this end, the Chinese government is establishing relevant laboratories in Beijing, Shanghai, and Hefei to promote the rapid development of quantum technology and quantum computing cloud platforms.

When China launched its “Five-Year Plan” in 2006 to promote economic and industrial development, it also focused on the development of quantum science and technological breakthroughs, as well as the deeply integrated development and application of quantum computing in emerging technologies such as AI, edge computing, big data, IoT, and cloud such as advanced space quantum communication technology and quantum computing combined with AI/ML, IoT, and cloud, providing assistance to the Chinese Academy of Sciences’ quantum satellites, the University of Science and Technology of China’s quantum computer, and other quantum processors to achieve breakthroughs in technology and functional characteristics. Therefore, the cumulative investment in China’s quantum field is estimated to reach US$15 billion in 2022.

Main applications of China’s quantum computing market

Considering the immense size, extremely harsh operating environment, and high price of quantum computers, quantum computing applications are rapidly developing towards cloud platforms. Therefore, research on quantum computers primarily focus on four types of applications: simulation, optimization, cryptography, and machine learning. “Simulation” is most used in processes that occur in nature such as weather forecasting, mid- and long-term climate deductions, and polar climate change. It is also widely used in fluid mechanics, drug discovery, battery design, and high-frequency trading, derivatives, and options pricing in the financial industry.

“Optimization” is the use of quantum algorithms to determine the best solution among a set of feasible options and is mostly used for risk management in traffic arteries, logistics, self-driving navigation systems, and financial investment portfolios. “Machine learning” is used to identify patterns in data and statistics, enhance the training of machine learning algorithms, accelerate AI development, and introduced to self-driving cars and financial systems to prevent fraud and money laundering.

As enumerated above, the scope of quantum computing applications is gradually expanding, covering fields including supply chain, finance, transportation, logistics, pharmaceuticals, chemicals, automobiles, aviation, energy, and meteorology. Sectors such as pharmaceuticals, chemicals, and new materials use quantum operations to analogize molecular properties, directly analyze and obtain large molecular properties through a computerized digital format, shorten the time for theoretical verification, and thereby accelerating drug research and development and the development of new materials.

In the automotive field, in order to accelerate the promotion of electrification strategies, major carmakers have applied quantum computing to chemical analogies and are committed to developing batteries with better performance. In the aerospace field, quantum computing is used to solve some of the most difficult challenges facing the aviation industry, from basic materials, product research and development, machine learning optimization, to complex system optimization, and are even changing the way aircraft are made and fly.

（Image credit: Pixabay）

Due to the implementation of lockdowns and dynamic zero-COVID in Shanghai and other locations in China, a large number of automotive supply chain manufacturers have been idle since March and the implementation of passive measures in many locales has led to a decline in both production and sales. A large number of automotive companies are clustered in Shanghai and it is the hub of the entire Chinese automotive industry. Many foreign automotive companies, Tier 1 suppliers, important parts and components headquarters, production bases, and distribution centers are located here, such as Tesla’s Shanghai plant.

This also includes an important state-owned automotive company, SAIC Motor and all its subsidiary automotive factories and wide network of suppliers. The total production capacity of Shanghai and Jilin accounts for approximately 20% of the whole of China. The production volume of major automakers in Shanghai in April 2022 will drop by 75% compared with March, while the production volume of major joint venture automakers in Changchun (Jilin Province) will drop by 54%. The drops in these two regions were sharper than the 38% decline in China as a whole. Recently, several districts in Beijing have been locked down. The impact of this on sales depends on the duration of lockdown. BAIC Motor, Beijing Benz, and Beijing Hyundai are located in Beijing and these companies will bear the brunt of these lockdowns if they are required to suspend operations.

Further discussing the three major effects of this wave of lockdowns, first, the lockdowns will disrupt the pace of new car launches in spring. Second, the export plans of automotive companies will be impeded, which will slow the expansion of Chinese car companies into overseas markets. Third, there is a risk of stagnant demand. The stagnation of demand can be viewed from several perspectives.

First, is the closure of traditional distribution channel car dealerships due to the decrease in orders. According to China Automobile Dealers Association statistics, more than 20% of automobile dealers in China have closed down, which hinders the car purchase process. In addition, since automobile pricing continues to rise due to a number of environmental factors, if delivery is continuously delayed or the acceptance of car orders is suspended, there is a risk of consumption shrinking as time goes on. Third, the negative impact of lockdowns on economic activities, employment, and salary income, coupled with global inflation, will bring uncertainty to demand in China’s automotive market in the second half of 2022.

The global auto market is experiencing a very unstable period. The lingering impact of the COVID-19 pandemic, the persisting shortage of semiconductor chips, and the Ukrainian-Russian war has caused chaos in the supply chain in Europe and other regions and it seems the war will last longer than expected. Many automotive plants are still unable to operate smoothly.  Facing sustained production reduction or the transfer of production capacity, coupled with China’s lockdown and zero-COVID policies which began in March, global car sales in 1Q22 amounted to only 19.6 million units, down 7% from the same period in 2021.

Although the auto industry accounts for the majority of the work resumption whitelist announced by Shanghai in April, restoring production capacity is expected to take some time as manpower and transportation capacity are still limited and sales may still decline or remain low. Therefore, after taking into account the regional consideration of the Chinese market in 2Q22, sales volume is expected to be 17.7 million units and annual sales volume is revised downward to 80 million units, an annual decline of 1.3%. This forecast is based on the assumption of a supply turnaround leading to rebounding sales in the second half of 2022, so changes in various environmental factors will strongly affect the revision of future expectations.

（Image credit: Pixabay）

According to TrendForce data, total sales of new energy vehicles (NEVs including battery electric vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles) in 1Q22 was 2.004 million units, an annual growth rate of 80%. Battery electric vehicles (BEV) demonstrated the strongest growth with sales reaching 1.508 million units. Plug-in hybrid electric vehicles (PHEVs) sold 493,000 units. Growth in NEV sales did not come easy, as global auto market sales (regardless of powertrain type) fell by 7% YoY in 1Q22 due to factors such as the chip shortage, Russian-Ukrainian war, and China’s pandemic lockdown and prevention measures.

In terms of BEV brands, Tesla’s sales in 1Q22 exceeded 310,000 units, ranking first with a market share of 20.5%. Chinese automaker BYD ranked second with 143,000 units and a market share of 9.5%. BYD announced in April that it would stop producing fossil-fueled vehicles and transform fully into a NEV manufacturer. Its BEV sales rose sharply by 271% in 1Q22 compared to the same period last year. Wuling, a subsidiary of SAIC-GM, has been ranked second since the launch of the Wuling Hongguang MINI in 2020 but dropped to third place in 1Q22. The main contributor to this was the multitude of models positioned as miniature and low-priced launched in the past year such as the Chery Ant and Changan Benben. As similar products arrived on the market, sales competition hindered growth.

In terms of PHEVs, BYD once again broke its quarterly sales record. Sales volume in 1Q22 reached 142,000 units, with a market share of 28.8%. As more PHEV models gradually appear in the market, it has become increasingly more difficult to capture a large market share. It is worth noting that the sales volume of PHEVs in the European market was lower in 1Q22 both when compared with the same period last year and when compared to 4Q21, affected the performance of some European brands.

TrendForce expects that most automakers will adopt a strategy of prioritizing the production of EVs. Therefore, continued growth in the sale of NEVs is expected in 2022. However, automakers will be under greater cost pressure this year. In particular, the Russian-Ukrainian war has greatly increased the cost of power batteries. This has caused automakers to increase their prices. Some countries including China will withdraw car purchase subsidies which dampens the market for low-priced mini-cars that previously supported the rapid growth of NEVs. Factors such as global inflation will become variables in the future growth momentum of NEVs.